Vancouver Retail Market Report 2024

During the latter half of the year, Vancouver’s retail market has experienced a slowdown in momentum. Leasing activity is near its lowest going back to 2015. Space absorption will fall short of matching 2023’s 500,000 SF. Nevertheless, the year will continue the trend of positive year-over-year absorption. The lack of space availability, currently 1.7%, is contributing to market slowdown with tenants facing challenges in finding space to satisfy their requirements with some reconsidering their timing until more suitable space arrives.

The low level of space availability could be a significant driver of rent growth if it were also met by increased demand from the consumer. Over the last year, retail spending is up 0.6% as of the third quarter. However, retail spending per capita is down 2.2%. The flagging per capita spending has resulted in adjusted shopping habits; spending on clothing, furniture, and food/beverage is down, while health-related purchases, general merchandise (department store and warehouse retailers), pharmacy and building material purchases have increased. Of the top leases in the past year, gyms and big box thrift stores rank multiple times among the biggest leases of the year, including Mission Thrift store at Haney Place Mall, Maple Ridge (37,000 SF) in the spring, and Inclusive Place of Pickleball Sports, taking 36,000 SF at Lougheed Town Centre, in grocery space that had sat vacant for a number of years.

Space absorption has remained positive in eight of the last ten quarters. Large tenant moved-outs have influenced quarters with negative absorption, such as a bowling alley or restaurants, which sent the first quarter into negative territory. Space availability often results in tenant replacement rather than vacancy as demand for space exists at either end of the market: the affordable or the high profile. Over the past year, high-profile space at transit-adjacent developments like the City of Lougheed and the Amazing Brentwood in Burnaby have made significant contributions to overall positive absorption, while further reaching suburban markets have seen developments like Latimer Village in Langley and District 1881 in Chilliwack, contribute.

The push for residential construction to address the housing crisis continues, often at the expense of older retail buildings that are taken out of inventory and replaced by a mixed-use project. Several malls will add density over the next five to ten years, bringing residential towers and more retail space. Oakridge, Richmond Centre, the City of Lougheed, and Coquitlam Centre are all expected to be part of a lengthier list of properties where significant retail space increases are expected. Retail construction starts this year are the lowest going back ten years and will result in the continued absence of new retail space until some of these mall densification projects and mixed-use developments ultimately arrive on the market.

The lack of space availability has ensured that rent growth has remained positive. Rents have grown by 3.6% in the last year, taking metro-wide average rates to $36.00 net. Over the next year, mortgage renewals will continue negatively affecting consumer spending. Limitations in the space market will keep rent growth positive but more likely in line with the inflation rate with upward pressure in pockets where new retail space is delivered. Neighbourhood centres, anchored by grocery stores and with tenants curated to include drugstores or healthcare tenants, will help rent growth in the year ahead. Retail space along thoroughfares that see high levels of foot traffic and draw top brands, as well as retail in growth markets like Surrey, Coquitlam, Burnaby and Richmond, are likely to continue to be the main drivers for rental growth in the region.